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MAN and HIS RICHES 


UNIFORM WITH THIS VOLUME 


HOW THE WORLD GREW UP 

The Story of Anthropology 

HOW THE WORLD SUPPORTS MAN 

The Story of Human Geography 

MAN AND HIS RECORDS 

The Story of Writing 

THE TONGUES OF MAN 

The Story of Languages 

MAN AND HIS CUSTOMS 

The Story of Folkways 

HOW THE WORLD IS RULED 

The Story of Government 

HOW THE WORLD LIVES 

The Story of Sociology 

THIS MAN-MADE WORLD 

The Story of Inventions 


Thomas S. Rockwell Company 
Publishers 
CHICAGO 








Publishers Note 


This book presents in popular form the 
present state of science. It has been reviewed 
by a specialist in this field of knowledge. An 
excerpt from his review follows: 


“Most of us spend the greater portion of 
our active life in the endeavor to earn a 
living and soon learn that our lives and 
fortunes are intimately bound up with 
the economic world. We also find that 
of the many social problems that confront 
us as citizens those arising out of this 
economic world are among the most im¬ 
portant. This little book is well designed 
to present to younger people some of the 
outstanding characteristics and problems 
of our present economic order. It should 
thus serve to develop an earlier interest 
in, and a better understanding of, the 
problems with which, both as private in¬ 
dividuals and as citizens, we are all so 
vitally concerned.” 


Signed: 


Chester W. Wright 

Professor of Economics, 
The University of Chicago 








Turning, for them who pass, the common dust 
of servile opportunity to gold 

—Wordsworth 















MAN and HIS RICHES 


By 

Mary B. Ambler 

u 

Drawings by 
Richard S. Rodgers 



THOMAS S. ROCKWELL COMPANY 

CHICAGO 

1931 


u 



defy 


2, 



Copyright, 1931, by 
THOMAS S. ROCKWELL COMPANY 
CHICAGO 





Printed in the United States of America 


AUG -3 1931 
©cn 40590 


CONTENTS 


I What Is Wealth? 11 

Can anything be wealth? Was there wealth in 
the Stone Age? What happened when man's 
wants increased? How did trade come about? 

Why did each man want to do better work? 

What is capital? How did man become richer? 

II The Early Kinds of Money 22 

What is money? Why is money necessary? Did 
the ancient Greeks have money? Where were 
coconuts used? What things have been used as 
money? How did the Chinese cash money come 
about? Who used bead belts as money? 

III Gold and Silver Coins 35 

Why are gold and silver so desirable as money? 

How was gold first used as money? Why were 
coins more convenient? What is counterfeiting? 

What were u clipped" coins? Did the discovery 
of America increase wealth? What happens 
when gold is discovered? 

IV How Business Grew Up 47 

Did primitive man need money? What was the 
guild system? What change came about in in¬ 
dustry? Was business still carried on in the 
home? Did the steam engine a feet business? 

How did factories affect wealth? How did they 
change? 

V How Business Is Managed 58 

Why cannot one man own a large business? What 
is a partnership? Is the corporation a good form 
of business? How is a corporation formed? 

What is a trust? How are goods given a price, 


or value? Is an insurance company a help to 
business? 

VI The Story of Commerce 68 

How did commerce grow? Why did people want 
to trade? What part did the fairs play? Has 
commerce helped civilization? Why was it hard 
to carry on early trade? Is commerce important 
today? What is a tariff? Why has England free 
trade? 

VII What Banks Are For 78 

What did the first banks do? How did banks 
help travelers? Did banks help increase business? 

What are checks? What kinds of banks are there? 

What is meant by securities? How do banks settle 
accounts with each other? What do trust com¬ 
panies do? 

VIII The Government and Our Money 91 

Where is our money made? Can anyone have 
gold made into coins? What gives value to gold? 

Is the silver in a silver dollar worth a dollar? 

What money is called token money? Are small 
coins useful? What are greenbacks? Why is 
paper money as good as gold? 

IX How Money Makes the World Go 101 

When was money of little use? Is money im¬ 
portant today? How do people get money? 

What are wages? What is profit? How does the 
government sometimes raise money? How is 
interest paid? Why do we have taxes? Are there 
many kinds of taxes? 




LIST OF ILLUSTRATIONS 


Turning, for them who pass, the common dust 

of servile opportunity to gold (frontispiece) 

Shoemakers were proud of the shoes they could ma\e 18 
In Greece a tripod was worth twelve oxen 25 

Chinese \nife money could be strung on a cord 32 

Ancient Gree\ coins may be found in museums today 39 
Men rushed to the gold fields in search of gold 45 

The members of each guild were craftsmen 51 

Most large businesses are owned by corporations 60 

Many chec\s are written every day 66 

Merchants carried goods about on the bac\s of donkeys 71 
Every city has many banhj housed in stately buildings 81 
Savings ban\s invest other people’s money 89 

Eure gold has but one exchange value 95 

Greenbacks were first issued during the Civil War 99 
A family in the city uses money for everything it needs 103 
Bonds are loans made for a long period of years 109 



Chapter I 


WHAT IS WEALTH? 

E VER since man has lived on the earth, he 
has had some form of wealth. He has 
always had things that were useful and valuable 
to him. 

But everything that is useful is not wealth, as 
we use that word. For instance, we could not 
go on living if we did not have air to breathe; 
but air is not wealth. We say that it is not 
wealth, because the supply of it, so far as man 
is concerned, is unlimited. Anybody can get 
all he wants of it without cost. It is often the 
same way with water. If you live near a well, 
you can dip up all the water you want for noth¬ 
ing. And if all the other people in the vicinity 
have wells, they will not want any of your 
water. But if water is sent to your house 
through pipes by the city, then a certain sum 


Can anything 
be wealth ? 


11 


12 


MAN AND HIS RICHES 


What is 
wealth? 


of money has to be paid every year for the water. 
Water is then a form of wealth. Again, if 
you want a very fine kind of water, such as 
mineral-spring water, you buy it in a bottle from 
a dealer, just as you buy milk. That, too, is 
wealth. 

In order for a thing to be wealth, it must be 
more or less scarce. It must be something that 
we call material; that is, something that you 
can see or handle. Things like health or beauty, 
for instance, are not wealth, though we prize 
them. Next, in order to be wealth, a thing 
must be useful; and by useful we mean that it 
must satisfy some human want. A pair of old 
shoes, all worn out so that they could not be 
used for any purpose, might be scarce and cer¬ 
tainly would be material, but they would not 
be wealth, because they would have no use. 
Again, a thing that is wealth must be owned by 
some person or some group of persons—for in¬ 
stance, by Mr. Smith, by the firm of Jones & 
Company, or by the United States Government. 
There might be a lot of gold in the rocks under 


WHAT IS WEALTH? 


13 


the Pacific Ocean, but it is not wealth, because 
it is not owned by anybody. 

Even the uncivilized people who lived many 
hundreds of years ago, in the time called the 
Stone Age, had wealth. For instance, they 
had furs for clothing, stone tools, and various 
other things. There are some tribes of people 
living in the world today who are very much 
like the people of the Stone Age. People who 
live that sort of life do not have much wealth. 
They get their food mainly by hunting and 
fishing, and they have very few wants. 

As man became more civilized, his wealth 
increased, both because he had more wants, and 
because by using his intelligence he found that 
he could invent means of producing the goods 
to satisfy his wants. But the more things he 
got, the more wants he seemed to have. Civil¬ 
ized people today are wealthier than people in 
the past, because they have more wants that 
they must satisfy, and also because they have 
learned how to accumulate wealth and are con¬ 
stantly devising newer and better ways of pro- 


Was there 
wealth in the 
Stone Age? 


14 


MAN AND HIS RICHES 


What happened 
when mans 
wants increased? 


ducing goods to make life more comfortable. 
People who are accustomed to living in fine 
modern houses, and to wearing good clothing, 
eating savory, well-cooked food, and riding in 
automobiles, would not be satisfied with living 
in mud huts, wearing dirty skins of animals, 
eating raw meat, or riding in an ox-cart. 

Man’s wants increased because, unlike the 
animals, he was able to control nature, by means 
of science and invention, thus using her forces 
and riches more and more. Along with this, 
there were two things that went closely to¬ 
gether: the division of labor, and trade. 

By the division of labor we mean that each 
man does one particular job or makes one par¬ 
ticular thing, and gets all his other wants satis¬ 
fied by goods or work from other people. When 
people lived by hunting and fishing, there was 
very little division of labor. 

The next step above this sort of life was 
when people learned how to plant crops, such 
as wheat and other grains. When this hap¬ 
pened, many more people could live in the 


WHAT IS WEALTH? 


IS 


same country than could live there before. 
Then, too, wheat and other grains can be kept 
through the winter and ground up into flour 
whenever desired. When people lived by hunt¬ 
ing and fishing, they had to eat the food all 
at once, because there was no dependable way 
of keeping it. Then, when fresh food was 
scarce, hundreds might die of starvation. With 
farming there was no longer this constant dan¬ 
ger of famine. Besides, they learned how to 
raise animals for food, such as cattle and sheep, 
instead of roaming around with bows and ar¬ 
rows to find wild animals for food. 

As a result, thousands of people could look 
around for other things to do. They did not 
have to wonder what to do. For now that 
human beings did not have to worry so much 
about where their dinners were coming from, 
they began to feel the need of many things that 
would make life more comfortable. They were 
getting to have more wants . Furthermore, the 
raising of crops and the tending of flocks and 
herds made necessary the making of many other 


Did more "wants” 
ma\e life more 
comfortable? 


16 


MAN AND HIS RICHES 


When did 
man begin to 
specialize? 


things, such as plows, scythes, flails, leather 
goods, more and better cooking utensils and 
dishes. 

Even while living mainly by hunting and 
fishing, mankind had begun to learn how to 
make certain things, such as baskets and pottery, 
and rough kinds of cloth. Now these arts, as 
we call them, began to grow very rapidly. The 
old ones were carried on in better ways, and 
many new ones were invented. Thus the work¬ 
ing of metals became greatly improved and a 
more and more important part of human life. 
People began to specialize ; that is, to become ex¬ 
perts in making certain things. One man would 
become a metal worker, another a glass blower, 
another a weaver, another a carpenter, and so 
on. Each man, by spending all his time on 
one particular job, would become a very skillful 
workman. He would produce much wealth 
of one kind. There would be more of it than 
he could use for himself and his family; so he 
would exchange what he did not need, for 
food and other things to supply the wants of 


WHAT IS WEALTH? 


17 


himself, his wife, and his family. Such was the 
growth of the division of labor. 

Trade was very closely tied up with the 
division of labor. Trade, too, like the division 
of labor, had existed from the earliest times. 
It grew up naturally; people did not say, “Trade 
is a good thing; therefore let us trade.” 

Whenever a person gives something that he 
owns to another person in exchange for some¬ 
thing that person owns, we have trade. People 
exchanged things simply because the thing 
that they took from the other person was more 
useful to them in satisfying some particular 
want. Thousands of years ago, in the Stone 
Age, there must have been times when a 
hunter had some extra arrowheads or stone 
hatchets that he would offer to another man 
for some furs or meat that the other man could 
spare. They did not realize that they were 
trading; they just “swapped” the things, and 
each man went away happy over the deal. It 
was much like what happens today among 
small boys. Jack has more marbles than he 


How did trade 
come about? 


18 


MAN AND HIS RICHES 


When did man 
become a 
skillful workman? 



needs, while Bill has a top that he has tired 
of. Bill would like ever so much to have a 
few more marbles, while Jack looks longingly 
at Bill’s top. It will not be very long before 
they have “swapped,” though perhaps Jack, in 
order to get the top, will have to give a few 
more marbles than he expected. These things 
are wealth, and where wealth is exchanged be¬ 
tween persons, young or old, trade takes place. 

When the division of labor went so far that 
each man had some special trade, he became 
a better workman. By doing the same job all 
the time, he showed more skill. Of course 
when he became more skillful, the things he 
made were of a better quality. He became 
very proud of the fine quality of the things he 
made. Other men in the same trade were mak¬ 
ing the same things, and each of them naturally 
tried to make his goods as fine as possible. The 
finer they were, the better would people like 
them, and the more would the maker get for 
them in trade. 

So the shoemaker, for instance, kept becom- 


Early shoemakers were 
proud of the shoes they 
could mal(e 







WHAT IS WEALTH? 


19 


ing a better shoemaker, and when his oldest 
son was growing up, the father usually taught 
him the trade, so that when the father died, Why did each 
the son would be able to carry on the business. man want t0 
He would be well trained in the job, and so 
he would become more skillful than his father 
and produce better shoes. He might invent 
new and cheaper ways of making shoes, with¬ 
out any lowering of the quality. Then he 
would get more wealth, because he would have 
more shoes to offer in exchange for other goods. 

The result was that men were always trying 
to invent ways of making things better and at 
less cost. Other men, as the population kept 
growing, found there was no more room in 
the old trades for more men to make a living; 
so they began making things that would satisfy 
new wants—things they could offer to the 
public in trade. 

People went on in this way century after 
century, and thus it was that the world kept 
getting more and more civilized. In ancient 
Egypt, four thousand years ago, civilization 


20 


MAN AND HIS RICHES 


What is 
capital? 


had already reached a high point. The division 
of labor had gone a long way. People had 
almost countless wants, and a great many things 
were made and exchanged so as to satisfy those 
wants. In other words, there was much wealth 
in ancient Egypt. 

When wealth became plentiful, people could 
begin to save some of it. So, by not using up 
everything right away, they could accumulate 
property. When money came into use, they 
could put their wealth into the form of money 
and save part of it. Such saved wealth, in what¬ 
ever form, is called capital . 

The man who owned capital could put it 
aside to use when he became old or sick and 
needed it. Or he might invest it, and thus ac¬ 
cumulate more wealth by means of it. By in¬ 
vesting his wealth, we mean that he might put 
it into some form of capital goods that he him¬ 
self would then own, or that he might lend it to 
another man who wanted to use it. Perhaps 
this man had invented a new kind of machine. 
But the machine would take a long time to 


WHAT IS WEALTH? 


21 


make, and meanwhile the man would have 
to buy food for himself and material for mak¬ 
ing the machine. He would use this other 
man’s wealth to pay his expenses until he could 
get some of the new machines made and sold. 
Then, when he received money from the sale 
of machines, he would pay back the man who 
loaned him the money, with an additional 
amount as a reward for allowing him the 
use of the money. So the man who had saved 
up this wealth in the first place would now be 
richer than he was before. 

As we go along, we shall see what a very 
important part this thing called capital was 
destined to play in the world’s business. With¬ 
out it, life would be very different for all of 
us today. 


How did 
men become 
richer? 


Chapter II 


What is 
money? 


THE EARLY KINDS OF MONEY 

I N ORDER that there could be an easy ex¬ 
change of wealth, there had to be money. 
When we think of the word money, we usually 
have in mind gold or silver coins, or engraved 
pieces of paper, such as a five-dollar bill. But 
money may include many other things. The 
dictionary tells us that the word means “any¬ 
thing that serves as a common medium of ex¬ 
change in trade.” It is something that is used 
in order to make it easier for people to exchange 
their wealth. 

You can see how awkward it would be if a 
man who made shoes wanted to buy a loaf of 
bread for his family, and there was no such 
thing as money. Perhaps the baker did not 
need any shoes at that time, and so did not care 
to exchange any of his bread for shoes. And 


22 


THE EARLY KINDS OF MONEY 


23 


besides, a pair of shoes would be worth much 
more than a loaf of bread. Of course, the shoe¬ 
maker could not very well cut up a shoe and 
offer the baker a piece of it in return for a 
loaf of bread, even if the baker wanted shoes. 

The best way out of the trouble would be 
to have some other article that everybody would 
be willing to accept at any time, and that could 
easily be divided up so that you could offer a 
large amount or a small amount, as the case 
might be, to the person from whom you wanted 
to buy something. 

We are so familiar with coins made of 
precious metals that we might imagine that 
they were used almost from the beginning of 
trade. But that is not true. For thousands of 
years after trade began there were no coins. 
Even some highly civilized nations of the an¬ 
cient world did not have them. 

At first, people used very strange and awk¬ 
ward things for money, as some tribes in differ¬ 
ent parts of the world still do. An early form 
of money, among people who kept flocks and 


Why is money 
necessary? 


24 


MAN AND HIS RICHES 


Did the 
ancient Greeks 
have money? 


herds, was cattle. We have a word, pecuniary, 
which means “consisting of or relating to 
money.” It comes from the old Latin word 
pecus , meaning “cattle.” In the same way, 
our word chattel, which now stands for any 
kind of property or wealth, is nothing but the 
word cattle in disguise. 

The ancient Greeks, in the early days of their 
history, used cattle as money. In the famous 
book called The Iliad, written by a man named 
Homer, we learn that a beautiful tripod (a 
bronze table with three legs) was worth twelve 
oxen. When the Greeks, long after this, began 
to make metal money, their first coins were 
stamped with a picture of an ox. 

Among the ancient Egyptians a number of 
different articles served as money, for they had 
no coins. Gold and silver rings were used as 
money, their value depending upon their 
weight. Lumps of copper shaped like bricks, 
as well as pieces of glass, also did the work of 
money. 

The Britons, who lived in England many 





In ancient Greece a tripod was worth twelve oxen 


25 













































• 

• 

• 




- 





THE EARLY KINDS OF MONEY 


27 


hundreds of years ago, made their money in 
the form of iron bars. 

As a matter of fact, almost every kind of 
thing that you can imagine has, at some time 
or other, in some country or other, been used 
as money. 

In the islands of the East Indies, down to 
our own day, a certain kind of seashell, known 
as cowries, has been used in enormous quanti¬ 
ties, just as we would use coins. Their use ex¬ 
tended even to Africa, and they served as money 
in China until copper took their place. In In¬ 
dia they were for a long time the regular money, 
with copper taking second place. Even white 
traders doing business in the South Seas have 
used cowry-shell money. 

In the East Indies, besides the cowry shells, 
many other articles have passed as money, such 
as salt, rice, tea, and even spades. In Burma, 
a country of southeastern Asia, rice was for long 
a popular form of money. Certain peoples of 
central Africa also liked spades as money, and 
iron spikes, too. 


Have many 
things been 
used as money? 


28 


MAN AND HIS RICHES 


How did the 
Russians use 
s\ins as money? 


Pieces of clay or porcelain have been used as 
money in many countries, such as India, Baby¬ 
lonia, Egypt, ancient Etruria in Italy, Siam, 
and Arabia. 

It is rather hard to imagine money in the 
form of dried fish. But in countries of Europe, 
where fishing is an important business, this kind 
of money has been used until very recent times. 

In Russia, many years ago, there was a very 
curious kind of money. It consisted of small 
pieces of skin, of different shapes, cut out of the 
whole skins of animals. The person who re¬ 
ceived one of these pieces had a right to the 
whole skin out of which it had been cut. 

Another strange money is the mat money 
of the islands in the South Pacific Ocean. It 
consists of long mats, divided into many folds. 
The value of a mat depends upon the number 
of folds in it, and their blackness or age. In 
the Fiji Islands a black cloth called tapa is 
used in the same way. 

In the islands scattered through this part of 
the world coconuts are a common form of 


THE EARLY KINDS OF MONEY 


29 


money. An Englishman who lived on the 
island of Car Nicobar some years ago tells how 
the people of that island wanted to buy a large 
racing canoe from the people of Chowra Island. 
The price of the canoe was 55,000 coconuts. 
But the Car Nicobar people did not like the idea 
of having to go to work and pick such an im¬ 
mense number of coconuts. So the people of 
Chowra agreed to accept other things for the 
canoe, for the people of Car Nicobar had many 
kinds of articles that they had received from 
white traders in exchange for their coconuts. 
The two peoples had to agree as to the value 
in coconuts of the other things. It seems that 
needles were worth 12 coconuts a dozen, and 
matches also were worth 12 coconuts for a 
dozen boxes, but a large piece of Turkey-red 
cloth was valued at 1600 coconuts. 

Until about a hundred years ago chickens 
were money in the Maidive Islands. The peo¬ 
ple of Tibet fancied pigs as money, while those 
of central Asia preferred oxen, and the inhabi¬ 
tants of Assam selected buffalo. Salt has been 


Where were 
coconuts used? 


30 


MAN AND HIS RICHES 


What things 
have been used 
as money? 


money not only in the East Indies but also in 
China, Burma, and many parts of India. In 
Turkestan mulberries were money. Among 
the Karens, a people of Burma, metal drums 
were good money, and in Calabar bunches of 
copper wire. 

For centuries, glass jars and bottles were used 
as money in southeast Asia, in the Malay archi¬ 
pelago, and among the near-by islands. A white 
man who was traveling in Burma wrote: “What 
money could not secure, empty pint bottles 
could. For four of these I got eleven eggs and 
a brood of chickens.” 

A still stranger kind of money consisted of 
dried tea leaves, in bricks and cakes, which 
for a long time were used all over Asia and 
eastern Europe, from China to Russia. 

Other odd kinds of money used by people in 
different parts of the world at various times 
included the following: In Burma, beeswax; 
in Siam, hammered brass frying pans; in East 
Africa, steel cylinders; in Abyssinia, salt bars, 
bags and quills of gold-dust; in many parts of 


THE EARLY KINDS OF MONEY 


31 


Africa, metal rings; in certain Pacific islands, 
red feathers, adze blades, and rings of white 
quartz; among the Indians of the Pacific Coast, 
clam shells on strings, measured by the foot 
and yard; in some of the South Sea islands, dog 
teeth and porpoise teeth; in the Malacca Islands, 
cloves. 

In the British colonies of America and else¬ 
where, during the seventeenth century, almost 
everything that one could think of served as 
money in different places. Among these things 
were corn, sugar, rum, cotton, wool, mahogany, 
molasses, ginger, indigo, furs and skins, and 
dried codfish. In the West Indies the use of 
sugar and tobacco as money lasted until only 
a little more than a century ago. In Virginia, 
during the colonial days of American history, 
tobacco was a very widely used form of money. 
Even salaries used to be paid in tobacco. 

In ancient China, knives and pieces of shirt- 
cloth were long in use as money. But these 
things were troublesome to handle, and over 
2,000 years ago there came into widespread use 


Have many 
articles been 
used as money 
in America? 


32 


MAN AND HIS RICHES 


How did the 
Chinese “cash” 
money come 
about? 


small bronze models of the original articles. 
These were known as the pu, or shirt money, 
and the tao, or knife money. In order to make 
the knife money convenient to handle, the blade 
was made very small, and the end of the handle 
was made round and pierced with a square hole 
so that the money could be strung on a cord. 
Finally, the blade was dropped altogether, 
leaving round pieces of metal, each with a 
small square hole in the middle. These be¬ 
came the famous Chinese cash, which have been 
in use for hundreds of years. Perhaps you may 
have seen some of them. That was the strange 
way in which China got its first coins. 

Shells and beads have probably been used 
more widely as money than any other articles, 
aside from the standard money of modern 
times. The reason is that people everywhere 
valued them as ornaments, and so were glad 
to take them in exchange. They lasted well, and 
it was easy to divide them into large or small 
amounts. An ancient Chinese book speaks of 
100,000 shells as being equal to great riches. 


Chinese \nijc money could 
be strung on a cord 






THE EARLY KINDS OF MONEY 


33 


The Indians of North America had a curious 
kind of money called wampum . It consisted of 
black and white shells, rubbed down, polished, 
made into beads, and then strung into belts and 
necklaces. They were valued according to 
their length, color, and luster, the black being 
the more valuable. Wampum was used by the 
white people in trading with the Indians. But 
its value was destroyed after a time by cheap 
European imitations. 

There has always been a close connection be¬ 
tween money and personal adornment. In the 
next chapter we shall see the part that this fact 
played in the selection of gold and silver for the 
making of coins. Many tribal people today, 
when they receive gold and silver coins from 
white traders in payment for goods, punch 
holes in the coins and make necklaces of them 
for their wives and sweethearts. 

But people who used beads, shells, and the 
other things that we have been speaking about, 
as their only money, could not have the sort 
of business dealings that are a part of the life 


Who used bead 
belts as money? 


34 


MAN AND HIS RICHES 


Has money 
anything to do 
with wealth? 


of civilized countries today. Even in countries 
like ancient Egypt, the people did not have 
nearly so much wealth as we have, and one rea¬ 
son for this was the lack of better money. The 
invention of more useful kinds of money went 
along with the growth of production, exchange, 
and consumption (use) of wealth. For it is 
with money that business has to be carried on. 


Chapter III 


GOLD AND SILVER COINS 

A FTER long experience in using many other 
J- \- substances as means of exchange, it began 
to be clear that the best material for money was 
the precious metals; that is, gold and silver. 

It is easy to see why gold and silver should 
be so desirable for use as money. In the first 
place, they do not “spoil.” After many years 
of use they are still perfectly good. Some people, 
for instance, own gold and silver jewelry that 
has been in their families for generations. Gold 
and silver are valued highly by almost every¬ 
body, because beautiful ornaments can be made 
out of them. Furthermore, they can be melted 
down into any sizes that are desired. They 
are always sufficiently scarce to have a high 
value, and this value, especially that of gold, is 
steadier than that of most other things that 


Why are gold and 
silver so desirable 
as money? 


35 


36 


MAN AND HIS RICHES 


How was gold 
first used as 
money? 


could be used for money. Therefore, if a man 
lends a certain sum to another man for a year, 
if it is payable in gold he can be sure that he 
will get about the same value back when pay¬ 
ment is made. This is very important in civi¬ 
lized countries, where there is much lending 
and borrowing. 

When people saw all these advantages in 
using gold and silver for money, we might 
think that they would immediately have in¬ 
vented coins; that is, round pieces of gold and 
silver in different sizes, stamped with the 
name of their value, like the coins we know 
today. But as we have already noticed, coins 
were not invented until rather late in human 
history. 

Countries of the ancient world, like Egypt, 
Babylonia, and Assyria, which were great em¬ 
pires with marvelous civilizations, never in¬ 
vented coins. But they used to make beautiful 
gold and silver ornaments, such as earrings and 
bracelets, and these ornaments frequently used 
to pass from hand to hand as money. 


GOLD AND SILVER COINS 


37 


In the Bible we read of earrings and bracelets 
of gold, valued according to their weight. It 
tells how there was weighed and given to a 
man named Ephron “400 shekels of silver, cur¬ 
rent money of the merchants.” The shekel 
was not a coin; it was a certain weight of pre¬ 
cious metal by which values were measured. 

It was not until about 700 years before Christ, 
which was many centuries after the great days 
of ancient Egypt, that the first coins came into 
use. That was a long time after the alphabet 
first appeared, and not far from the same place. 
And the exact date of the invention of coins is 
somewhat doubtful, just as is the exact date of 
the invention of the alphabet. Furthermore, 
each of these inventions was made by a not very 
great or powerful people. 

The first coins were made somewhere along 
the western coast of Asia Minor, either by the 
Lydians or by their Greek neighbors. These 
first coins, strangely enough, were not made of 
gold or of silver, but of a mixture of the two. 
We call such a mixture an alloy. This was a 


Which came 
the alphabet 
or money? 


38 


MAN AND HIS RICHES 


Why were coins 
more convenient? 


natural mixture of gold and silver, called 
electrum. 

Soon after, however, coins began to be made 
of pure gold and of pure silver. The Greek 
coins were very beautiful. You may see some 
of them in our museums, almost as fresh and 
handsome today as when they were first made, 
more than 2,000 years ago. 

It is easy to see why coins are more convenient 
than bars of gold or silver, earrings, bracelets, 
and such things. In the first place, they could 
be made in all sorts of sizes, with the value 
plainly stamped on each. It would not look 
very well to have a gold bracelet, that a lady 
wanted to wear, marked “Ten dollars,” for 
everybody to see. Besides, round flat coins 
could be neatly piled in stacks, wrapped up, and 
carried around. 

There is another fact that made coins very 
desirable as money. When the government 
of the nation made the coins and stamped the 
value on them, it would mean that you could 
be quite sure that there actually was the right 


GOLD AND SILVER COINS 


39 


amount of gold or silver in them and that it was 
of the right quality. For it is very easy for dis¬ 
honest persons to cheapen gold and silver by 
mixing them with less expensive metals. It is 
called debasing them. 

Ever since ancient times, the making of coins 
has, under ordinary conditions, been a job done 
by the government. Other people have been 
forbidden to make coins; because if everybody 
had the right to make them, nobody could be 
sure that they were of the proper weight and 
quality. When people who have no right to 
make coins do make them, it is called counter¬ 
feiting. It is against the law, and a person 
who is caught counterfeiting is punished very 
severely. 

Probably it was the merchants who first asked 
the government to take charge of making coins, 
for then there would be less disputing as to the 
value of the coins. The making of coins is 
known as minting . It was Croesus, a famous 
king of Lydia, more than 500 years before 
Christ, who first minted gold and silver coins 

Some ancient Gree\ coins 
may be found in 
museums today 



40 


MAN AND HIS RICHES 


When did coinage 
of money become 
general? 


according to a regular system of weights. The 
king of Persia, a very powerful country of Asia 
at that time, soon began minting gold coins, 
called darics, and silver coins, called shekels. 
Many of the little Greek republics in Europe, 
even before this time, were coining silver. By 
about the year 400 b. c., the coinage of money 
had become quite a general custom throughout 
the civilized world. 

In the Roman Empire, several centuries later, 
the coining of money was an important part 
of the government’s duty. The empire was so 
large that mints —that is, buildings where coins 
are made—had to be set up in different places 
to take care of the local needs. In the reign 
of the Emperor Diocletian, about 300 years 
after Christ, there were fourteen mints, one of 
them in far-away London; and by the time of 
the Emperor Constantine, not many years later, 
the number of mints had increased to eighteen. 

After the Roman Empire came to an end, 
there was much disorder throughout Europe. 
There no longer existed a central government 


GOLD AND SILVER COINS 


41 


that could coin money for all the countries 
that had formerly belonged to the empire. Even 
after new nations began to grow up, some of 
the coinage was in the hands of private people. 

The coins made during the Middle Ages were 
of very much poorer quality than were those 
of the ancient world. Many of the coins were 
clipped ; that is, pieces were chipped off by 
dishonest persons. There was much counter¬ 
feiting also, although the offense was punished 
with terrible cruelty. 

It was not until about the year 1500 that all 
the coinage of France was controlled by the 
central government. In Germany for hundreds 
of years different towns and cities minted their 
own money. 

In modern times the moneys of all the lead¬ 
ing countries of the world are coined at the 
government mints. So everyone has confidence 
that they are of good quality and accepts them 
in trade without doubt or hesitation. 

The most valuable coins are of gold and of 
silver. But gold and silver are not the only 


What were 
“clipped” coins? 


42 


MAN AND HIS RICHES 


What various 
metals were 
used as coins? 


metals that have been and still are used for 
making coins. In the first place, gold and silver 
are so valuable that they are not suitable for 
making coins of very small value. A one-cent 
piece made of gold would be so small that you 
could hardly see it; even if made of silver, its 
size would still be so small that it would easily 
be lost. Therefore, less valuable metals are used 
for making coins of small value. 

There were iron coins in ancient Greece, 
just as there were in Japan down to recent times. 
There have been coins made of lead in some 
countries of the Far East, as there were in 
Denmark until 300 years ago. Tin halfpen¬ 
nies and tin farthings were coined in England 
at one time. Platinum, a rare and very valuable 
metal, was made into coins in Russia about a 
century ago. Nickel is still used a great deal 
for coins of small value in different parts of 
Europe. Brass coins were minted by the early 
Roman emperors. Bronze and copper have 
been used very commonly for low-value coins. 

Among the Greeks, the favorite metal for 


GOLD AND SILVER COINS 


43 


the higher-value coins at first was silver. But 
because of its bulk, silver was awkward when 
large sums had to be carried from place to 
place. So gold coins for the higher values be¬ 
gan to be used; for an equal value in gold would 
weigh much less, since gold is much more pre¬ 
cious than silver. On the other hand, the 
silver coins of the lowest value were so small 
that it was troublesome to handle them. So 
bronze (a blend of copper and tin) began to 
be used for making coins of low value, the 
bronze coins for small amounts being large 
enough to handle without danger of losing 
them. Bronze is harder than pure copper, and 
so the coins stood usage well. By the year 359 
b. c., gold, silver, and bronze coins were in com¬ 
mon use throughout the Greek world. 

In Rome the first coins were of bronze. It 
was not until about 268 b. c., that a silver coin, 
the denarius, came into use. Still later, gold 
coins were minted. The Emperor Constantine 
ordered that from a pound of pure gold there 
should be minted 72 coins called solidi. 


Why were gold, 
silver and bronze 
coins made? 


44 


MAN AND HIS RICHES 


Did the discovery 
of America 
increase wealth? 


During a large part of the Middle Ages, silver 
was the metal mostly used for coinage, for gold 
had become hard to get. When trade began 
to pick up again, after the wars known as 
the Crusades, gold became more plentiful in 
Europe. The first important gold coin minted 
since ancient times was the famous florin, which 
appeared in the city of Florence, Italy, in the 
year 1252, and before long other gold coins 
like it were being minted in various parts of 
Europe. 

In England the first regular gold coins were 
made in 1343. France and Germany had be¬ 
gun to use gold coins somewhat earlier. 

Meawhile, trade was growing so fast that the 
demand for money was greater than the small 
supply of gold and silver could fill. Commerce 
would have been badly crippled if it had not 
been for the discovery of America by Columbus 
in 1492. In the New World the Spaniards dis¬ 
covered rich mines of gold and silver, and soon 
a steady stream of these precious metals was 
pouring into Europe and helped to make pos- 


GOLD AND SILVER COINS 


45 


sible the enormous growth of commerce that 
then began to take place. 

In 1849-50, the discovery of gold in California 
and in Australia added large amounts of gold 
to the world’s supply and played an important 
part in the great growth of trade during the fol¬ 
lowing half-century. Still again, in 1898, rich 
gold mines were opened in frozen Alaska. At 
the present time, the greatest output of gold is 
from the mines in South Africa. But in spite 
of all the immense output of gold from these 
new mines, the world’s business has kept need¬ 
ing more and more gold for use as money, 
and so the value of gold has continued to be 
very great. It is now the standard money of 
nearly every country in the world, while silver, 
for reasons that we shall see later, has become 
less important. 

In the old days, when new gold fields were 
discovered, thousands of men would rush there 
and dig out the gold from near the surface, or 
sift the sands along a stream in order to collect 
the bits of gold lying there. Some of these 

\ ' 

Men rushed to the gold 

fields in search of gold 


What happens 
when gold is 
discovered? 




46 


MAN AND HIS RICHES 


people became very wealthy after a few weeks 
or months of work. 

But gold is not so easy to get nowadays. In 
the mines of South Africa, the rock containing 
the precious metal has to be taken from great 
depths in the earth. This requires very ex¬ 
pensive machinery, and therefore much capital. 

Now let us go back and see how business 
grew up. 


Chapter IV 


HOW BUSINESS GREW UP 

P RIMITIVE man knew little about division 
of labor. Each family lived by itself and 
produced nearly all the things it needed. People 
got along very much like that, even in the days 
when America was a new country, when there 
were no railroads and many families had to 
live in the wilderness, far away from towns and 
cities. In some out-of-the-way parts of the 
world today there are people that still live al¬ 
most entirely by themselves. 

When things were like that, there was not 
much need for money, although there might 
be a certain amount of bartering, or exchanging 
one thing for another. 

But when the division of labor became more 
common, then money came into use; and as 
man’s wants became more numerous, with the 


Did primitive 
man need 
money? 


47 


48 


MAN AND HIS RICHES 


What was an 
apprentice? 


growth of inventions by which they could be 
supplied, business began to grow more and 
more important. 

For many hundreds of years everybody 
worked at home. If a man was a shoemaker 
or a carpenter, for instance, he would have a 
little work-room in the front or back of the 
house where he and his family lived. The 
shoemaker would buy leather from a tanner 
and make every part of the shoe himself. Gen¬ 
erally he had a boy—his own son or the son 
of some neighbor—helping him and learning 
the trade. Such a boy was called an apprentice . 
When the boy had spent several years learning 
how to make shoes, and had grown to be a 
young man, he would get married and open 
up a little shop of his own in his home. 

There were no machines in those days to 
turn goods out in wholesale lots. Everything 
was made by hand. The people who bought 
the shoes knew who had made them. There¬ 
fore, the shoemaker was very anxious that the 
shoes he made should be of good quality, and 


HOW BUSINESS GREW UP 


49 


he took pride in his work. For if he did not 
make good shoes, his customers would go some¬ 
where else. 

During the Middle Ages, in England and 
other countries, all the men who worked at 
the same trade came together and formed a 
sort of society or union known as a guild. The 
members of each guild were craftsmen; that 
is, they worked at a trade or craft. There were 
guilds of different craftsmen—weavers, dyers, 
goldsmiths, carpenters, and so on. 

Each guild member was the master of his 
own business. He bought the raw materials, 
he hired his apprentices, and he sold the prod¬ 
uct. The guilds themselves were very power¬ 
ful. They had strict rules for their members, 
who had to see to it that their goods were of 
standard quality. In return, the guild protected 
its members in different ways. No person 
could make or sell goods unless he belonged 
to the guild in that line. The guilds were inter¬ 
ested in education, and founded schools. They 
also gave money to charity. 


What was the 
guild system? 


so 


MAN AND HIS RICHES 


What change 
came about in 
industry? 


All business was in the hands of the guilds 
for four or five hundred years. Then a change 
in the way of doing business began. The change 
appeared first in the cloth-making industry. 
Men who did not belong to the guilds went 
into the cloth business. They bought up a 
supply of raw wool. Then they hired work¬ 
men to spin and weave this wool into cloth. 
They even supplied the workers with the neces¬ 
sary spindles and looms for doing the work. 

These workers were very different from the 
guild members. They were not their own 
bosses. They did not own either the tools or 
the material that they worked with, and they 
did not sell the finished cloth. They simply 
were paid a certain sum of money—that is, 
wages—for doing the work. 

In other words, capital had become separated 
from labor. By capital, you will remember 
that we mean wealth that is used in producing 
more wealth. The master-clothiers supplied 
the capital and the workers supplied the labor. 
When the clothier sold the finished goods, of 



The 


members of each guild were craftsmen; 
that is, they worked at a trade or craft 


Si 

















HOW BUSINESS GREW UP 


53 


course he made a profit, all of which he kept. 
This profit was a sum over and above the 
amount that the clothier had spent for raw 
materials, tools, the payment of labor, and 
other expenses. 

But this system was still very far from the 
system of business that we are familiar with 
today. There were no factories in those days. 
The workers did the work in their own homes. 
So this way of doing business was called the 
domestic system, for the word domestic means 
anything that has to do with the home. 

Finally, another plan was worked out. All 
the people living in a certain district, who made 
the same goods, were gathered into one big 
central building where they all worked together 
during the day and went home at night. In 
the course of time, quite a number of such build¬ 
ings began to spring up. They were called 
factories, which means buildings in which 
goods are made. 

The first factories were used for spinning 
yarn and weaving cloth. About a hundred and 


Was business 
still carried on 
in the home? 


54 


MAN AND HIS RICHES 


Did the steam 
engine affect 
business? 


fifty years ago, machines were invented that 
made it possible for one person to spin and 
weave a much larger amount than before. But 
it took a great deal of power to run these ma¬ 
chines. So factories were built on the banks of 
swiftly flowing rivers, where the rushing water 
was harnessed to wheels that made the ma¬ 
chines work. 

Then the steam engine was invented and 
improved so that it could be put to doing this 
work. The steam was produced by heating 
water, and to heat this water hot fires had to 
be built. This required a large amount of coal. 
Then the factories were built close to the great 
coal mines, so that it would not be necessary 
to carry the coal long distances, for to do so cost 
too much money. 

It was found that making goods in factories 
was much cheaper than making them in the 
workers’ homes. The workers put in all their 
time on the job, and there were men called in¬ 
spectors to see that the work was done prop¬ 
erly. The factories kept getting bigger and 


HOW BUSINESS GREW UP 


55 


bigger, often with many hundreds of people 
working in each one. 

This new way for the production of goods 
(industry) was such a tremendous change that 
it is called the Industrial Revolution . 

The division of labor was carried to greater 
and greater lengths. One man no longer made 
a whole pair of shoes, nor even a large part 
of one. He made a very small part, and other 
men made the other parts. By spending all 
his time on the making of one part, a worker 
could become very skillful and speedy at his 
job, and so would all the other workers in the 
making of the other parts. 

This brought about an immense increase 
in the amount of wealth that was being pro¬ 
duced. Machinery and factories made possible 
what is known as mass production. Great in¬ 
dustrial cities grew up in which there were 
hundreds of factories and thousands of workers. 

The owners of the factories were all the time 
seeking new markets—that is, places where 
goods are bought and sold. The factories pro- 


How did factories 
affect wealth? 


56 


MAN AND HIS RICHES 


Were the first 
factories li\e 
those of today? 


duced more goods than could be sold in the 
home markets. So the producers, or manu¬ 
facturers, sent men to foreign countries to find 
new markets. This made commerce grow as 
it had never grown before. 

At first, the workers in the factories had very 
hard lives. They had few rights, they were 
poor, they had to work long hours, and many 
of the factories in which they worked were 
dark and unhealthful places. Even small chil¬ 
dren worked in the factories. After a while, 
the workers came together and formed groups 
called labor unions. They demanded more 
pay, shorter hours, and better working condi¬ 
tions. By getting together as groups they were 
able to make better bargains for their labor. 
But there were often bitter disputes between 
the workers and their employers. The men 
would sometimes strike—that is, all would stop 
work until they got what they wanted. This at 
times led to much disorder and fighting. Some 
employers honestly tried to deal fairly with the 
workers. The government also passed laws to 


HOW BUSINESS GREW UP 


57 


make better conditions for the workmen. Such 
laws said that factories should be well-lighted 
and healthful, and that dangerous machines 
should be so made that they would not injure 
the workers. 

As a result of all this, factory workers today 
are much better off than they used to be in the 
old days. 


How did 
they change? 


Chapter V 


Why cannot one 
man own a 
large business? 


HOW BUSINESS IS MANAGED 

M ACHINERY, more and more division of 
labor, and mass production, began to 
produce wealth on a bigger scale than ever be¬ 
fore in the history of the world. 

Of course, it cost a huge amount of money 
to build a large factory, to buy machinery to 
put in it and fuel to run the machinery, to 
buy the raw materials necessary for making 
the finished goods, to pay the workers their 
wages, and then to sell the goods. Besides, 
there would be many clerks working in the 
office, writing letters and keeping the accounts, 
and they had to be paid wages also. 

All this money had to be paid out for some 
time before any money came back from the 
sale of the goods. One man would very sel¬ 
dom be rich enough to provide so much money 


58 


HOW BUSINESS IS MANAGED 


59 


—that is, the capital needed by the business. 
It had to be raised in some other way. 

So instead of there being only one owner of 
a large business, there would be a number of 
them, from two or three (if the business was 
not very large) up to hundreds and even thou¬ 
sands. As time went on, there came to be 
three different ways of carrying on a business 
that could not easily be owned and managed 
by one person. 

The first of these ways of doing business is 
called a partnership. In a partnership, two or 
more men come together and put their money 
into a business. They have equal shares in 
the business and are equally responsible for it. 
If the business makes a profit, the partners share 
it equally. On the other hand, if the firm fails 
in business, and only one of the partners has 
any money of his own left, then the people to 
whom the firm owes money, whom we call 
the creditors, may make that one partner pay 
all the debts. 

Naturally, the men who form a partnership 


What is a 
partnership? 


60 


MAN AND HIS RICHES 


Is the corporation 
a good form 
of business? 


should know each other very well; they should 
be men in whose honesty and ability each of 
the partners can have confidence. If one of 
the partners quits the partnership, or if one of 
them dies, then the partnership comes to an 
end. But the partners may take in new partners 
from time to time, if they choose to do so. 

But partnerships are not suited to very large 
businesses. So another form of doing business 
was invented. This is called the joint-stoc\ 
company, or the corporation. Most large busi¬ 
nesses today are owned by corporations. A 
corporation is very different indeed from a part¬ 
nership. In the first place, there are usually 
hundreds or even thousands of owners, who 
are called stockholders. The ownership of the 
company is divided into shares, and these shares 
are sold at so much per share. One person 
might own one share, another person five 
shares, and another person ioo shares, or any 
other number. These shares are called the 
stock of the company. The ownership of a 
share of stock gives the owner the right to a 


Most large businesses are 
owned by corporations 




















HOW BUSINESS IS MANAGED 


61 


share of the profits. Each stockholder also has 
a right to vote in the election of directors, as 
the men are called who actually control the 
business. If a man owned one share, he would 
have one vote, if he owned fifty shares, he 
would have fifty votes, and so on. 

The stockholders, as we have just said, elect 
the directors. There may be any number of 
them. All of them together are known as the 
Board of Directors. They hold meetings from 
time to time to decide important questions. 
They also elect the officers of the corporation, 
such as a President, a Vice-President, a Secre¬ 
tary, and a Treasurer. These officers have direct 
charge of the business, usually giving all their 
time to it every day, and being paid salaries for 
the work they do. They also hire the heads 
of departments, and these men in turn hire the 
workmen and other employees and see that 
the work in the factory or shop is carried out. 

In a corporation the stockholders are not 
each responsible for the debts of the business. 
The corporation is treated by the law as if it 


How is a 

corporation 

controlled? 


62 


MAN AND HIS RICHES 


How is a 

corporation 

formed? 


were a sort of person itself. If it fails, the stock¬ 
holders lose only their stock. 

People who own stock can also sell it, if they 
wish to do so. In fact, shares of stock are being 
bought and sold every day by different people. 
From the profits of the business are paid divi¬ 
dends. They are paid to the persons who own 
the stock at the time, in proportion to the 
amount of stock that they own. If a man owns 
5 per cent of the stock, then of course he gets 5 
per cent of the dividends. 

In order to form a corporation, the men who 
are interested in the matter have to apply to the 
Secretary of State of some one of the forty-eight 
states in the Union for a paper called a charter, 
which gives permission to these men to form a 
corporation. There are certain rules that they 
must follow in doing so. Then the corpora¬ 
tion may engage in business. The corporation 
usually has certain laws of its own, known as 
by-laws, which its officials have to obey. 

The stockholders often do not even know 
each other personally. They may be scattered 


HOW BUSINESS IS MANAGED 


63 


all over the United States. In fact, some of 
them may live in foreign countries. 

Corporations are formed for carrying on all 
sorts of businesses. These include manufactur¬ 
ing industries of every kind, railroads, steam¬ 
ship lines, banks, retail stores, insurance com¬ 
panies, and so on. 

Corporations also may be formed for carry¬ 
ing on public services which do not seek to 
make profits, such as colleges, universities, hos¬ 
pitals, and societies of various kinds. 

Many corporations in commerce and indus¬ 
try become exceedingly rich and powerful. Be¬ 
cause of their great wealth and power, it some¬ 
times has happened that corporations have tried 
to crush out weaker companies in the same line, 
in order to control everything themselves, and 
so in some cases to make the public pay higher 
prices. That is called getting a monopoly of 
a certain kind of business. It might be that 
several great corporations would join together 
for that purpose. Such a combination is called 
a trust. In order to prevent that, the United 


What is a 
trust? 


64 


MAN AND HIS RICHES 


How are goods 
given a price, 
or value? 


States has passed laws against it, known as anti¬ 
trust laws. The government has said that it is 
wrong for corporations or others in the same 
line of business to get together and “fix” prices 
that everyone will have to pay for goods. 

The price of goods is simply their value in 
exchange. It is the amount of money that we 
have to pay when we go to the store to buy 
something. This value is always expressed in 
terms of money—for instance, fifty cents, or five 
dollars. And it must apply to a certain definite 
amount or quantity of goods (of a given quality 
or grade), such as a pound, a quart, or a dozen. 
The prices of most things are changing all 
the time. These changes are due to a great 
many causes, but they are primarily governed 
by what we call the law of supply and demand. 
If there is a large increase in the supply of 
anything, and other conditions remain the 
same, the price will go down. But if there 
is an increase in the demand, so that more peo¬ 
ple want to buy, and other conditions again 
remain the same, then the price will go up. 


HOW BUSINESS IS MANAGED 


65 


Before leaving this subject we must glance 
very briefly at another way of doing business; 
this is the cooperative society . It is a newer plan 
than the partnership and the corporation. Co¬ 
operative simply means “working together.” 
In a cooperative society the people who are 
actually engaged in the business also own it. 
They choose the persons who manage it. In 
a cooperative society each person ordinarily has 
one vote, regardless of the amount of money 
that he has put into the business. There are 
not many cooperative societies now, but their 
number is increasing. They have been more 
successful in England than in America. 

Of course, too, there are still many partner¬ 
ships in the business world, and there are also 
businesses owned and managed by one person, 
such as little grocery stores and candy stores. 

Besides the manufacturers (producers) there 
are many people called retailers. Retailers sell 
goods directly, in small quantities, to the per¬ 
sons who use them. They own the stores where 
we do our shopping. Some retailers, the mail 


What is a 
cooperative 
society? 


Who are the 
retailers? 


66 


MAN AND HIS RICHES 


What do the 
bro\ers do? 


order houses, carry on large retail businesses 
by parcel post. 

The retailers generally do not buy their goods 
directly from the manufacturers. They get 
many goods from dealers known as wholesalers, 
jobbers, or brokers, who buy the goods in large 
quantities from the producers and sell them in 
smaller quantities to the retailers. They can 
afford to keep larger stocks of goods on hand 
than can the retailers. 

These retailers and other merchants are some¬ 
times spoken of as middlemen, because they 
stand between the producer and the consumer 
—that is, the person who uses the goods. 

We shall see a little later how the banks help 
business men. Something like banks are the 
insurance companies. Insurance companies 
take charge of the ris\ of doing business. Every 
business is in danger of meeting some misfor¬ 
tune, such as a bad fire, which no one can fore¬ 
see or prevent. Such a misfortune might ruin 
a business by destroying everything that the 
business owned. Therefore, if a corporation 


Many checks are written 
every day 






















HOW BUSINESS IS MANAGED 


67 


faced this risk every day, people might be afraid 
to buy stock in it and banks would be afraid to 
lend it money. 

The insurance company, in return for a small 
payment of money, agrees to take charge of 
this risk. So the owners of a factory or other 
business will buy fire insurance, to the amount, 
for instance, of $100,000. Then if the factory 
should happen to be burned down, the insur¬ 
ance company will pay the owners $100,000, 
and this money will enable them to build a new 
factory and keep the business going. The in¬ 
surance company can afford to do this, because 
many other persons also buy insurance from it, 
and there are only a few fires. But no one is 
sure that his building may not burn down; so 
most people in business protect themselves from 
the risk of heavy loss, by buying insurance. 


Is an insurance 
company a help 
to business? 


Chapter VI 


How did 
commerce 
grow? 


THE STORY OF COMMERCE 
OMMERCE grew naturally out of local 



trade. By commerce we simply mean 
trade carried on between places that are far 
apart. Trade between neighbors gradually led 
to commerce with outsiders. Here again, people 
did not realize that commerce was a good thing 
and so decided to have commerce. Like many 
other things, it grew up because it was helpful. 

For a long time, trade was carried on within 
each little group or tribe. But after a while 
trade spread out farther and farther, so that 
different groups and tribes, and at last different 
countries, were trading with each other. Trade 
between different parts of the same country we 
call domestic commerce, and trade between en¬ 
tirely different countries we speak of as foreign 
commerce. 


How did 
commerce 
grow? 


68 


THE STORY OF COMMERCE 


69 


But why should the people of one country 
want to exchange things with the people of 
another country? The answer is, for two rea¬ 
sons: first, because one country may have a very 
different climate from another country, and so 
it cannot raise certain fruits and vegetables. But 
it may have some things that the other country 
lacks; for instance, iron and coal. So each 
country exchanges the things that it has more 
of than it needs, for other things of which it has 
none or not enough. 

Besides, the people of one country may have 
special advantages in making certain goods, so 
that they can make them better and more 
cheaply than the people of other countries can. 
Naturally, it will be worth while for the people 
of other countries to buy those things from the 
people of that country. 

Even in so large a country as the United 
States, where there are many different kinds of 
climate, there are lots of things we like to eat 
and drink that we have to get from other coun¬ 
tries. How strange life would seem to us if 


Why did 
people want 
to trade? 


70 


MAN AND HIS RICHES 


What part did 
the fairs play? 


we did not have Brazil to supply us with coffee 
and China to grow tea for us! And how badly 
off many other countries would be if they could 
not get American cotton, machinery, and such 
things! 

When commerce began to become an im¬ 
portant business, a special class of men gave all 
their time and attention to it. They were called 
merchants. At first, a merchant would travel 
around from one part of the country to another, 
with a pack of goods on his back or on the back 
of a horse, a donkey, or a camel. He would go 
from town to town, selling his goods and buy¬ 
ing more goods to sell in other places. 

Then there came the idea of holding fairs. 
Once a year the merchants from all over the 
country would come together at a certain place 
to sell their goods. People who wanted to buy 
goods would travel to the fair, sometimes long 
distances. Then they could buy all sorts of 
different things at one time and in one place, 
instead of having to wait for the merchants to 
visit them. 


THE STORY OF COMMERCE 


71 


Where was 
commercial 
law first used? 


These fairs were held at some convenient 
place, generally on the banks of some river, 
because it was cheaper and safer to travel by 
water and also to carry goods in boats. We 
still speak of making shipments, even when we 
have railroads carry our goods for us, on land. 

Sometimes the places where these fairs were 
held grew up into important cities. When so 
many merchants were gathered in one place, 
and there was a great deal of buying and selling, 
there had to be rules that everyone obeyed. It 
was at these fairs that commercial law, which 
today gives us rules for all our business dealings, 
first began to be used. In England there were 
many places where these great fairs were held, 
just as there were in other countries of Europe. 

In Russia the great fair at the place called Nijni 
Novgorod has lasted right down to our own 
days. k,/: 

It was the desire to trade with other countries 
that led to many of the world’s greatest voyages 
of discovery. Men thus learned more and more 
about the earth on which they lived. Long 


Merchants carried their 
goods about on the 
bac\s of donkeys 






72 


MAN AND HIS RICHES 


Has commerce 

helped 

civilization? 


before the time of Christ, the Mediterranean 
traders made voyages to England in order to 
get cargoes of tin from Cornwall, where there 
were rich mines of that metal. Hundreds of 
years later, the Portuguese sailed around Africa, 
and Columbus set out on his voyage that 
resulted in the discovery of America, because 
they wanted to find new routes to India and 
China, so as to trade with those countries and 
bring back to Europe such things as silks, tea, 
and spices. 

Commerce helps to keep countries at peace 
with each other, especially when they need each 
other’s products. War interrupts commerce 
and the nations on both sides suffer. Then, too, 
to carry on commerce successfully, people need 
to know how to write and to do sums in arith¬ 
metic, and many persons want to learn foreign 
languages. It was a trading people, the Phoe¬ 
nician merchants, who first spread the use of the 
alphabet. 

At first, the means of carrying goods were 
very crude. On land, as we have already no- 


THE STORY OF COMMERCE 


73 


ticed, packs of goods were carried on the backs 
of men and of animals. As the roads were often 
poor, transportation was slow and difficult. 
Worse still, in many places robbers were lying 
in wait for the merchants in order to rob them. 
It was easier and much cheaper to transport 
goods by water. But the boats in early days 
were small and not very seaworthy, and as there 
were no compasses, by which boats could be 
guided, it was not safe to venture far from land 
for fear of getting lost on the vast wastes of 
the ocean. 

Things were like that for a long time. But 
at last good roads began to be built on land, 
and travel was made safe. Larger boats, too, 
were built, and the use of the compass made 
it possible to undertake voyages across the ocean 
without danger of getting lost. 

For hundreds of years more, however, the 
goods that were exchanged in commerce had 
to be articles that were rather small in bulk and 
of high value, because transportation was still 
so expensive that it did not pay to ship big, 


Why was it 
hard to carry 
on early trade? 


74 


MAN AND HIS RICHES 


How was trade 
built up? 


heavy articles, of small value, for long distances, 
as the freight charges would be more than the 
goods were worth. 

The articles exchanged in commerce, in those 
days, were mostly luxuries; that is, very valu¬ 
able things that were light and took up small 
space—things that wealthy people wanted in 
order to make life more enjoyable. Ordinary 
things, such as most articles of food, common 
clothing, building materials, and so on, had to 
be produced near the places where they were 
to be used. 

Today, that is all changed. When a way 
was found to make steam do work for man, 
the cost of transporting goods became very 
much less. A long train of cars loaded with 
freight can be pulled by a locomotive for hun¬ 
dreds of miles at a cost so low that all kinds of 
bulky goods can be moved long distances. The 
cost of carrying goods over the water was re¬ 
duced still more when small wooden sailing 
vessels were replaced by great iron steamships. 

When transportation by land or by water 


THE STORY OF COMMERCE 


75 


was very slow, only goods that would not 
“spoil” could be exchanged in commerce. But 
that was changed when swift steamboats and 
railroads were built, and still more so when 
a way of preserving food products by means 
of “cold storage” was invented. 

Today the whole world is bound up in a 
network of commerce. For no country on 
earth produces everything that the people of 
that country need and want. Take, for in¬ 
stance, so common a thing as rubber. Without 
rubber we could have no automobile tires, no 
overshoes, no waterproof raincoats, and none 
of a thousand other things made of rubber that 
we use in our daily life. But not a bit of rubber 
is grown in the United States or in other coun¬ 
tries with a temperate climate; for the rubber 
tree can grow only in the hot climate of the 
tropics. 

Some countries, such as England, cannot 
raise enough food to feed all their people. If 
commerce were to stop, millions of people in 
those countries would be starving in a very short 


Is commerce 
important today? 


76 


MAN AND HIS RICHES 


What is a 
tariff? 


time. But England and other countries pro¬ 
duce larger quantities of manufactured goods 
than their people need, and so they send these 
things to other countries in exchange for food. 

Commerce is a good thing; as a rule, the 
more commerce a country has, the more pros¬ 
perous it is. But many countries, like our own, 
have laws called tariffs, so that most of the 
foreign goods coming into the country have to 
pay a certain tax, known as customs duty. The 
reason for this is to protect the industries within 
the country. It may be that other countries 
can make the same goods more cheaply, because 
raw materials are cheaper or labor is paid less 
money, and it is feared that if there were no 
tax, these foreign goods would flood the country 
and crowd out the goods made at home. But 
some people think it would be better if there 
were no tariffs and trade were free everywhere. 
That is a question that has not yet been settled 
in a way that everybody considers right. 
England, for instance, takes the other side and 
practically has free trade. 


THE STORY OF COMMERCE 


77 


England was able to adopt free trade in 1846 
as a result of the Industrial Revolution. At 
that time the English began to make more 
goods than they could use at home, so they be¬ 
gan selling the goods they could not use to 
other countries. At the same time, as these 
goods were made very cheaply, English cities 
did not have to fear the selling of cheaper goods 
which had been brought in from other coun¬ 
tries. Thus her industries did not need protec¬ 
tion. However, England does collect some 
taxes from such goods as tea, coffee, tobacco, 
and liquors. 


Why has 
England 
free trade? 


Chapter VII 


What did the 
first han\s do? 


WHAT THE BANKS ARE FOR 
UMEROUS banks are found in every 



-JL \| city. Usually they are housed in stately 
stone buildings. In these buildings the bankers 
do their business. It is an important business. 
Without it, the world would have a hard time. 

A banker is a dealer in money or credit. The 
word ban\ means “bench,” because the early 
bankers in Italy, hundreds of years ago, used 
to sit at little benches in the market-place, 
changing money for the people. Different 
cities in Italy had their own coins, which were 
not like those of other cities. So when people 
went from one city to another, they had to ex¬ 
change their money for the money of the other 
city, so that they could buy things in the shops. 
For a small charge, these bankers exchanged 
one kind of money for another. 


What did the 
first han\s do? 


78 


WHAT BANKS ARE FOR 


79 


They also received money from people for 
safe-keeping, and out of this money they made 
loans. Besides this, they began to sell drafts, How did ban\s 
which were pieces of paper which could be ex- hel P travelers ? 
changed for money. In those days, traveling 
on the roads was very dangerous, for there were 
many robbers lying in wait for travelers, es¬ 
pecially if the travelers were believed to be car¬ 
rying money. 

So when a man in a certain city w T anted to 
send some money to a man in another city, he 
would go to his banker, give him the money, 
and received from him a little piece of paper, 
called a draft, which was an order on a banker 
in the other city to pay a stated sum of money 
to the person named in the draft. For a banker 
in one town kept money on hand with bankers 
in other towns. Then the man would take the 
draft and send it to the man in the other city, 
who could at once go to the bank in his own 
town and get the money. 

Then there was no danger of losing the 
money, because even if the draft was stolen 


80 


MAN AND HIS RICHES 


Did ban\s 
help increase 
business? 


by robbers it would do them no good, since 
the bank would only pay the money to the 
person whose name was written on the draft. 

The first banks that were much like the banks 
of today were the Bank of Amsterdam, in Hol¬ 
land, and the Bank of Hamburg, in Germany, 
which began to do business about 300 years ago. 
But those early banks did not do nearly so many 
things as banks do today. The main thing that 
they did was making loans, usually to mer¬ 
chants who needed money for carrying on their 
business. In return for a loan, a merchant had 
to pay the bank a sum of money called interest, 
at a certain per cent. Per cent is a short form 
of a Latin phrase, per centum, which means “by 
or in the hundred.” Five per cent, for instance, 
means five one-hundredths (5/100). So the 
interest on $100.00 at five per cent would be 
$5.00 a year. 

When a bank makes a loan to a merchant, it 
is said to be giving him credit, because it trusts 
him to repay the amount with the necessary 
interest. 



Every city has many ban\s housed in stately 
stone buildings 


81 























































































































































Bl " ( HI S3 •"? . IK % I 






' 






























































. 1 1 . 





























































WHAT BANKS ARE FOR 83 

People who deal with the bank deposit their 
money in it for safe-keeping. In commercial 
banks they have the right to make out checks 
against their deposits. Checks are little pieces 
of paper, ordering the bank to pay out certain 
sums of money to some person. Business men 
find it more convenient to pay bills by check 
than by money, because the checks can be sent 
through the mails in envelopes, just like letters. 
Again, if a check is lost or stolen, no harm will 
be done, because the bank will not pay the 
money except to the proper person. However, 
a person receiving a check may order the bank 
to pay it to some other person. But he must 
sign his name on the back first; this is called 
“endorsing” it. 

The rightful holder of a check can go to the 
bank and get coin—gold or silver—for it if he 
wishes. But in most cases he merely hands the 
check to his own bank, and gets the amount 
added to his account. Then his bank collects 
the amount from the other bank. 

Every day many checks are being made out, 


What are 
checks? 


84 


MAN AND HIS RICHES 


How do banks 
carry on business? 


payable at the various banks in the city. Each 
bank, at the end of the day’s business, could 
simply count up the checks it had received, 
drawn against other banks, and the checks 
drawn against itself and presented at other 
banks for collection. Usually the difference be¬ 
tween the amount this bank owed other banks 
and the amount other banks owed this bank 
would be rather small. 

Besides, if Mr. A and Mr. B both have ac¬ 
counts at the same bank, and Mr. A sends to 
the bank for “deposit” a check given to him 
by Mr. B, then the bank simply subtracts the 
amount from Mr. B’s account and adds it to 
Mr. A’s account, and no money has to be paid 
out. 

So the banks found that it was not necessary 
to keep on hand enough gold and silver to pay 
every check. If the people had faith in the 
honesty of the bank, it would be necessary only 
to keep enough gold and silver to pay out the 
money that was actually wanted by its custom¬ 
ers. The rest, you see, became simply a matter 


WHAT BANKS ARE FOR 


85 


of bookkeeping, transferring sums from one 
man’s account to another’s. 

For this reason, the amount of money that is 
represented by checks is far greater than the 
actual gold and silver and other kinds of money 
actually held by the banks. Checks are not 
real money, but they do the work of money. 

If we did not have them, business would be 
seriously crippled, for there is not enough actual 
money to carry on the huge amount of trade 
going on in the world today. 

In the United States we have several kinds what \inds of 
of banks. For instance, there are the national ban K 5 are there? 
banks, which do business under the laws of the 
United States Government, and there are state 
banks, which do business under the laws of the 
various states. The laws are very strict about 
how banks shall be run, so that the people who 
deposit money in them will not run the risk 
of losing it. 

Most national and state banks are called com¬ 
mercial banks. That is to say, their customers 
are mostly business men and business houses, 


86 


MAN AND HIS RICHES 


What are 
han\ notes? 


such as corporations. But the national banks 
do something that state banks cannot do. They 
can issue bank notes. A bank note is a kind of 
paper money. We shall look at other kinds a 
little later. Many of our five-dollar bills are 
notes issued by national banks. These notes 
are simply promises to pay the persons who hold 
them the amount of money printed on the 
notes. For every bank note that it issues, the 
bank must hold an equal amount of valuable 
paper called United States bonds. 

Every business house needs money to carry 
on its dealings. Some of this money it has to 
borrow from a bank, and it then repays the 
loan from the money it gets out of the busi¬ 
ness that it does. Such loans are generally for 
a short time—one, two, or three months. The 
bank likes to get its money back at frequent in¬ 
tervals. This is called keeping its funds liquid. 

Suppose that a business man wants to borrow 
$1,000 for three months. He goes to the bank 
and tells the banker of his need. If the banker 
believes that the man has a good reason for seek- 


WHAT BANKS ARE FOR 


87 


ing the loan, and that he will be prepared to 
repay it when due, he will lend him the money. 
Generally he will simply “credit” the man’s 
account with $1,000. In return for the loan, 
the borrower gives the banker a note, which 
is a promise, signed with the borrower’s name, 
to repay the money, with interest, at the end of 
three months. 

If the man does not repay the loan as prom¬ 
ised, the banker can take the matter into court, 
and get what is called a judgment against him. 
Then the banker can take some of the man’s 
property and sell it, so as to get back the money 
due him. But that is very troublesome. So 
generally the banker when he makes the loan 
asks the borrower to give “security.” By this, 
we simply mean that he hands over to the bank¬ 
er some of his property, such as stocks and 
bonds, to hold until the loan is paid back. 

All business houses keep their money in the 
bank. When it is necessary to pay a bill, the 
man who has charge of such matters—the treas¬ 
urer or the cashier—writes out a check. 


What is meant 
by security? 


88 


MAN AND HIS RICHES 


How do ban\s 
settle accounts 
with each other? 


In a large city, where there are dozens of 
banks and thousands of checks are being writ¬ 
ten every day, each bank receives from its cus¬ 
tomers many checks on other banks. So a way 
had to be worked out for all the banks to settle 
their accounts with each other. That is now 
done at a place called a clearing house. Each 
bank brings to the clearing house the checks 
that it received the day before, which are to be 
paid by the other banks, and it gets from the 
other banks the checks that they have received, 
which it must pay. For instance, let us say that 
the First National Bank has $100,000 in checks 
against the Merchants’ State Bank, and the 
Merchants’ State Bank has $95,000 in checks 
against the First National Bank. Then the 
Merchants’ State Bank simply gives a check for 
$5,000 to the clearing house, which then pays 
the First National Bank, and the matter is 
settled. All the other banks in the city deal 
with each other in the same way. 

There are also savings banks. A savings bank 
may be a separate bank or a department of a 


WHAT BANKS ARE FOR 


89 


commercial bank. People who put their money 
in savings banks cannot draw checks, although 
they can take all or a part of their money out 
whenever they need it. Savings banks “invest,” 
or loan, these funds, so as to make money for 
themselves and the people who put the money 
in the bank and who are entitled to “interest.” 

Another kind of bank is the trust company. 
A trust company makes a specialty of taking 
care of the estates of people who die, and who, 
in their “wills,” want the wealth that they leave 
managed according to their wishes. There are 
also investment banks, which are interested in 
organizing and reorganizing large businesses 
that need unusually large capital. 

Last but not least, there are the Federal Re¬ 
serve banks. They are a part of a plan known 
as the Federal Reserve System, which was es¬ 
tablished under a special law passed by Con¬ 
gress some years ago. There are twelve of these 
banks, each in a different part of the country. 
They are managed by a group of men known 
as the Federal Reserve Board, in Washington. 


Savings ban\s invest other 
people's money 


What do trust 
companies do? 



















90 


MAN AND HIS RICHES 


Do the Federal 
Ban\s issue 
money? 


The Federal Reserve banks give aid to the other 
banks of the country when it is needed, so as to 
keep the entire banking business in a healthy 
condition. 

The Federal Reserve banks also issue notes, 
like the national bank notes, that are used as 
money. There are two kinds: Federal Reserve 
bank notes, which are backed by United States 
Government bonds bought from national 
banks; and Federal Reserve notes, backed by 
gold and by the promissory notes of business 
houses (commercial paper), held by the Fed¬ 
eral Reserve banks. There is an immense 
amount of Federal Reserve notes in use today. 


Chapter VIII 


THE GOVERNMENT AND OUR 
MONEY 

X THE money that is used in our country 



-L 1-is made by the United States Government. 
The coins are made in buildings known as 
mints, of which there are several, located in 
different cities, and the paper money is engraved 
at a place called the Bureau of Engraving, in 
Washington. 

It is Congress, our chief law-making body, 
that draws up the rules in regard to the making 
of the country’s money. Congress decides what 
coins shall be minted; it also decides just what 
shall be the purity of the metal and the weight 
of the coins. 

Gold, for instance, in its perfectly pure state, 
is so soft that coins made out of it would not 
wear well. So the law says that one-tenth part 
of copper shall be mixed with the gold. The 


92 


MAN AND HIS RICHES 


Can anyone 
have gold made 
into coins? 


gold still looks about the same, but it is some¬ 
what harder. 

Anybody who owns a quantity of gold may 
bring it to the mint, and the United States Gov¬ 
ernment will make it into coins for him, free 
of charge. The governments of other countries 
generally do the same thing, though sometimes 
there is a small charge for performing the serv¬ 
ice. At one time there was such a charge in 
the United States, amounting to one-fifth of a 
cent for each dollar, for the minting cost. 

People may bring to the mint the gold that 
they have, even if it is not of the right standard 
of purity; in fact, it may be gold ore, which is 
gold mixed with rock or other minerals, just as 
it comes from the mines. The mint will take 
this gold and, for a small charge, will assay it 
(find out how pure it is), refine it (take out the 
impurities), and add the necessary alloy (mix¬ 
ture of copper), so that it will be the right kind 
of gold for making coins. Then the mint will 
make the coins and give them to the man who 
brought in the gold. 


THE GOVERNMENT AND OUR MONEY 93 


Gold is now the standard metal used in our 
coinage, as it is in most of the other countries 
of the world. 

When the mint makes a ten-dollar gold piece, 
which the law says must contain 258 grains of 
gold, the fact that the Government stamps the 
coin and says that it is ten dollars, does not 
make it worth any more than the same amount 
of the same kind of gold bullion (uncoined 
gold). Its value is exactly the same. 

This does not happen because of some law 
passed by Congress; it happens because of what 
we call economic law . Let us see what that 
means. Of course, not all our gold is made into 
coins. Much of it is constantly being used for 
making jewelry, gold leaf, and even fillings for 
teeth. If gold coins should become scarcer, they 
would be more valuable than the same amount 
of gold bullion, because of that law of supply 
and demand which, as we have seen, controls 
price, which is the value of things expressed in 
terms of money. Then everybody who owned 
gold bullion would rush to the mint to have it 


What gives 
value to gold? 


94 


MAN AND HIS RICHES 


Why is silver not 
used as a standard 
metal for coins 
any more? 


made into coins, because the same amount of 
gold in coins would be worth more. 

But then gold bullion would be scarcer and 
gold coins more plentiful. Again the law of 
supply and demand would begin to work, but 
in the opposite direction. The value of gold 
bullion would be greater than the value of 
the same amount of gold in coins. So people 
would take their gold coins and melt them 
down into bullion, thus bringing up again the 
value of the coins. This will go on until the 
value of gold coin and gold bullion settles to 
the same level. 

In the past, silver was also used as a standard 
metal for coins in the United States. But this 
is no longer true; the United States has made 
gold the single standard for money. Having 
two standards was found to be very trouble¬ 
some, because the value of the two metals, in 
relation to each other, is constantly changing. 

But we still have a number of different silver 
coins in daily use as money, and nobody refuses 
to accept them. There are many silver dollars 


THE GOVERNMENT AND OUR MONEY 95 


still in use, although none have been coined 
since 1905. They are so big and heavy that 
most people would prefer to have a one-dollar 
bill, which is very much easier to carry. Most 
of them are kept in the United States Treasury. 
The amount of silver in the silver dollar is now 
worth less than 50 cents. But it still will buy 
a dollar’s worth of goods, because the Govern¬ 
ment strictly limits the number of them, and 
is willing to exchange them for gold. Of course 
people who own silver cannot take it to the mint 
and have the Government make it into dollars 
for them. 

In place of the silver dollars in the Treasury, 
the Government prints bills, which are called 
silver certificates. If you have a one-dollar cer¬ 
tificate, you could take it to Washington and 
the Government would give you a silver dollar 
for it. But people do not take the trouble to 
do that, because they can spend a dollar bill 
just as they could a silver dollar. So the silver 
certificates pass from hand to hand in payment 
of debts of all kinds, until they are nearly worn 


Pure gold has but one 
exchange value 


Is the silver in 
a silver dollar 
worth a dollar? 



PURE GOLD-NO MATTER 
IN WHAT FORM-HAS 
BUT ONE EXCHANGE 
VALUE. 







96 


MAN AND HIS RICHES 


What money is 
called to\en 
money? 


out, and then the Government prints new ones 
to take their place. 

Besides the silver dollars, we also have silver 
half-dollars, quarter-dollars, and dimes. They 
have less silver in them, in proportion to their 
size, than has the silver dollar. But they keep 
their value, like the silver dollar, because the 
Government stands back of them and will ex¬ 
change them for other money if asked to do so. 
They differ from the silver dollar in one fact; 
that is, silver dollars are legal tender, good for 
all payments up to any amount, while the 
smaller silver coins are legal tender in amounts 
only up to ten dollars. Such money is some¬ 
times called to\en money, which means that it 
takes the place of standard money. 

These coins are, of course, very useful for 
making small purchases and paying small debts. 
In fact, we must have them for such uses. But 
if someone owed you $100 and wanted to pay 
it to you in dimes, that would make it very 
awkward for you. It would take 1,000 dimes 
to make $100. So for any amount over ten 


THE GOVERNMENT AND OUR MONEY 97 


dollars you can insist that a person shall pay 
you in standard money. 

There are two other kinds of token money. 
These are the five-cent piece, known as a nickel, 
though it is really three-quarters copper and 
only one-quarter nickel; and the one-cent piece, 
which we sometimes call a copper, and which 
is 95/100 copper and 5/100 tin and zinc. A 
person does not have to accept more than twen¬ 
ty-five cents’ worth of nickels or coppers. But 
even the nickel and the copper are very useful 
servants. How could we get along without 
one or the other when we wanted to telephone 
or to buy a newspaper? 

There are seven kinds of paper money in 
use in our country. We have already men¬ 
tioned some of them. First, we spoke of the 
bank notes that are issued by the national 
banks; and we spoke of the two kinds of notes 
issued by the Federal Reserve banks. And 
we have just said something about the silver 
certificates. 

There are also bills known as gold certificates. 


Are small 
coins useful? 


98 


MAN AND HIS RICHES 


What are 
greenbacks? 


The United States Treasury keeps a large 
amount of gold coin and bullion in its vaults. 
In place of this gold, it issues bills. These are 
the gold certificates. You have perhaps seen 
some of them. They have yellow backs, and 
are of different values—from ten dollars up— 
as printed on the face. Most people prefer the 
paper certificates, because they are easier and 
safer to carry, and as valuable as the actual gold. 

Then there are the United States notes, some¬ 
times known as greenbacks, although other 
kinds of paper money also now have the back 
printed with green ink. They are really prom¬ 
issory notes of the United States, in which the 
United States promises to pay to the holder of 
the note a certain sum of money, just as when 
Mr. Smith gives the bank a note, promising to 
pay some amount of money, except that no par¬ 
ticular time of payment is mentioned on the 
greenbacks nor any interest. 

The greenbacks were first issued during the 
Civil War, many years ago, when the United 
States Government needed money badly. As 


THE GOVERNMENT AND OUR MONEY 99 


no time was set when the Government would 
pay the notes (exchange them for gold), and 
the quantity issued was very large, their value 
fell. But in 1879 the Government said that it 
would pay these notes whenever the people 
who held them asked it to do so. It then began 
to do this, but whenever a note was paid by be¬ 
ing exchanged for gold, or was otherwise paid 
in, the note was issued over again. The 
amount of these greenbacks is fixed by law at 
$347,000,000, and there can never be any more 
of them than that amount. The Treasury al¬ 
ways keeps on hand gold to the amount of 
$ 150,000,000, for exchanging greenbacks. The 
result is that the greenbacks are now just as 
good as any other paper money, and everybody 
accepts them just as readily. 

The one other kind of paper money in this 
country is the Treasury notes of 1890. As the 
date shows, they were issued a long time ago. 
Their purpose was to enable the Government 
to buy a large quantity of silver. Since then, 
the Treasury has been retiring them from cir- 


Greenbac\s were first issued 
during the Civil War 


Why is paper 
money as good 
as gold? 



100 


MAN AND HIS RICHES 


culation. There is only about one million dol¬ 
lars’ worth of them still in the hands of the 
people, and so they are no longer an important 
part of the country’s money. 


Chapter IX 


HOW MONEY MAKES THE 
WORLD GO 

N OWADAYS everyone has to have money, 
and much of it, in order to live. Robin¬ 
son Crusoe, alone on his island, where he gath¬ 
ered all the food that he needed, built his own 
house, and made his own clothes, had no need 
for money. He would not have known what 
to do with it. 

Back in the early days of mankind there was, 
as we have seen, little need for money. Even 
today many tribes can get along fairly well by 
means of barter—that is, exchanging goods di¬ 
rectly. Even the Americans who first settled 
in the wilderness and built up our nation did 
not need money so much as we do, for these 
hardy people raised most of their own food 
and even made their own “homespun” cloth¬ 
ing. In our own day, people who live in the 


When was money 
of little use? 


101 


102 


MAN AND HIS RICHES 


Is money 
important 
today? 


city need money more than do the farmers, be¬ 
cause the farmers can raise some of their own 
food, while the city people have to buy at the 
stores everything they eat. 

A family living in a town or city has to use 
money to buy everything that it needs. It 
must pay money for all its food; it has to pay 
money for clothing, shoes, furniture, and a hun¬ 
dred other things; and it has to pay money to 
the doctor, the dentist, and everybody else who 
does work for it. 

Every grown-up person, unless somebody else 
takes care of him, must somehow get a supply 
of money in order to live. Most people get their 
money by working; that is, producing and sell¬ 
ing goods, or performing some kind of personal 
service, in payment for which they receive 
money. 

Everyone is continually receiving money and 
continually spending it. So money keeps pass¬ 
ing from one person to another, going round in 
a circle. A dollar bill, for instance, may pass 
through the hands of a dozen persons in the 



A family living in the city has to use money to 

buy everything that it needs 


103 



















HOW MONEY MAKES THE WORLD GO 105 


course of a day. Every time it is spent, a sale 
of some kind is made, either of goods or of 
services. The same dollar that a person spent 
a week ago may come back to him next week 
in his salary or in payment for something he 
sells. In this way money keeps moving and 
makes the wheels of the world go round. 

There are so many different kinds of business 
in which people make money by selling things 
that we cannot begin to name them here. This 
is true also of personal service. Some people 
do manual work (work with the hands), like 
the carpenter, the plumber, and the truck- 
driver, although people who do manual work 
must use their minds to some extent. Other 
people do mental work, like that of the book¬ 
keeper, the doctor, and the teacher, although 
people who do mental work must use their 
hands to some extent. 

Some people, like most doctors and lawyers, 
sell their services directly to the public. But 
most people who render service work for others, 
generally for some corporation or institution. 


Iloiv do people 
get money? 


106 


MAN AND HIS RICHES 


What are 
wages? 


The pay received by people who work for 
others is called wages , though the word salary 
is often used in the case of mental work. Every¬ 
body who works for others should receive 
enough money in wages to enable him to buy all 
the things that he needs for himself and for 
his family, if he has a family. It should also 
enable him to save some money for use in time 
of need, and to buy life insurance, so that his 
family will be provided for in case of his death. 

People who sell goods, such as the owner 
of a grocery store or of a farm, or a person who 
writes books, or those who sell special services 
to the public, such as doctors and lawyers, are 
working for themselves, and so there is nobody 
to pay them wages. They must try to sell their 
goods or their services to whoever will buy 
them, at a price above the cost of producing the 
goods or furnishing the service. 

For instance, if a baker sells his bread at 
just the amount it cost him to make the bread, 
or at a price below that amount, he would 
have nothing left over to buy the things that 


HOW MONEY MAKES THE WORLD GO 107 


he or his family need in order to live, or he 
might even have to borrow money to buy the 
flour and other things that go into the making 
of bread. So he has to charge a certain amount 
above the cost of making the bread. This 
difference between the cost of production and 
the selling price of the goods is known as profit. 

From his profits the owner of a business gets 
the money that he must have to support himself 
and his family, just as the man who works for 
others gets his money in the form of wages. 

Everybody who owns stock in a corporation, 
and receives from time to time payments in divi¬ 
dends, is really receiving a share in the profits 
of the business. A wage-earner may own a 
few shares of stock in some company, and so 
he gets part of his income (the money that he 
receives) in the form of wages and part in the 
form of profits. 

There are two other ways in which people 
get incomes. If a person has saved up some 
money, he may buy bonds with it. Bonds are 
simply a special kind of “notes,” most of which 


What is 
profit? 


108 


MAN AND HIS RICHES 


How does the 
government 
sometimes 
raise money? 


are issued by corporations that need money to 
help carry on their business. When a person 
buys a $500 bond, he is really lending $500, for 
which the borrower agrees to pay him a certain 
sum, say five per cent, every year. This pay¬ 
ment for the use of money is called interest . 

Even the United States Government issues 
bonds. You will remember we mentioned 
them when speaking of the national bank notes. 
During the World War, the Liberty Bonds 
were issued to help raise the immense amount 
of money needed to carry on the war. The rates 
of interest on Government bonds are lower than 
those on commercial bonds. People are willing 
to accept a low rate of interest on them, because 
there is no danger of losing money that is loaned 
to the United States Government, whereas a 
corporation that borrows money might fail and 
be unable to pay the money back. So people 
who lend money to corporations want a higher 
rate of interest to pay them for the risk that 
they are taking. 

Usually bonds are loans made for a long pe- 


HOW MONEY MAKES THE WORLD GO 109 


riod of years. The borrower pays the lender his 
interest every year or twice a year, and at the 
end of the agreed time it repays the amount of 
the loan itself, which is called the principal. 
For instance, if a person buys a $500 bond of a 
certain corporation, with interest at five per 
cent a year, payable semi-annually, he will re- 
'"‘>12.50 every six months, because five per 


ceive 


cent interest on $500 for a year is $25.00. Then, 
too, a person who owns a good bond can usually 
sell it very easily to someone else if he should 
happen to need the money before the time 
that the borrower must repay the amount of 
the bond. 

The other important way in which people 
may receive payments of money is from the 
ownership of land and buildings. For instance, 
if Mr. Smith owns a corner lot downtown, with 
a building standing on it, and the owner of a 
dry-goods business would like to open a store 
there, he gets from Mr. Smith a “lease” for a 
term of years. A lease is simply a written per¬ 
mission to use the land and building. In the 


How is 
paid? 


interest 


Bonds are loans made for 
a long period of years 



110 


MAN AND HIS RICHES 


Why do we 
have taxes? 


lease, the man who is to use the property (he 
is called the tenant) agrees to pay a certain sum 
of money to Mr. Smith. The payments may 
be once a year, once a month, or at other times. 
This money is called rent . 

Some people who are very wealthy may get 
all their income from interest or from rent. 
Others may perhaps get a part of their income 
from interest or from rent, and part from profits 
or wages. 

Old people sometimes live on money-pay¬ 
ments called pensions, paid either by the Gov¬ 
ernment or by a corporation for which they once 
worked. But pensions are really a sort of wages, 
paid to these people as a reward for long and 
faithful work in the past. 

The Government also needs money in order 
to pay its bills. It has to collect this money from 
the people, because the Government is the ser¬ 
vant of the people. The money that the people 
pay to the Government in order that it may 
carry on its work is in the form of taxes. 

Some taxes are paid to the United States Gov- 


HOW MONEY MAKES THE WORLD GO 111 


ernment; others are paid to the State Govern¬ 
ment, and others to county, city, and township 
governments. 

There are many different kinds of taxes, some 
of which are known as direct taxes and others 
as indirect taxes. One kind of direct tax is the 
income tax. People have to pay a small per¬ 
centage of the money that they receive every 
year, above a certain amount, to the United 
States Government. In some states there is also 
an income tax which must be paid to the State 
Government. Other direct taxes are those on 
real estate and on personal property, such as 
furniture and automobiles; taxes on corpora¬ 
tions, taxes on certain kinds of business, and 
even taxes (licenses) on dogs. 

Indirect taxes are taxes that are not paid 
directly by the people. For instance, there are 
taxes on tobacco, cigars, cigarettes, playing 
cards, and other things that are considered 
luxuries. The dealer or manufacturer simply 
adds the tax to the price that the people who 
use these things pay for them; so they do not 


Are there 
many \inds 
oj taxes? 


112 


MAN AND HIS RICHES 


How does the 
government 
use its money? 


realize that they are paying a tax. The tariff, 
also, is really an indirect tax, because the people 
who buy goods imported from foreign coun¬ 
tries, on which there is a tariff, ordinarily have 
to pay more for them than they otherwise 
would. 

But the money that the people pay to the 
Government in taxes is spent again by the Gov¬ 
ernment in payment for the goods that it buys, 
and for the salaries and wages of the thousands 
of persons who work for the Government. 















































































































